The UK Politics & Brexit Thread

[Benzowner]

Haven't you fell into the trap at looking at gross income as opposed to net, You base a mortgage on gross, but you live on net income and that is whether to pay 20% or 40% tax. Bear in mind that you also pay NI the 20% becomes nearer 30% and the 40% nearer 50%, it all deductions at the end of the day, and we all live on our net incomes not our gross.

 

[markjay]

To clarify, I am not arguing for lower taxes from an ideological of from the social fairness points of view.

Instead, I am simply suggesting that we start by listening to economists and statistians with regard to how tax revenue collection can be optimised, and then run this though the political lense.

Tax revenue is obviously a complex issue, and it is not limited to the effect it has on workers' financial motivation and productivity.

As an example, increases in taxes and especially in VAT tend to result in a shrinking formal economy and an expanding black economy: sole traders not raising invoices, labourers working for cash-in-hand, etc.

There are many other examples for the complex relation between tax policies and tax revenues. My impression is that the majority of tax policies tend to stem from a political perspective, and ignoring the science.

 

[Bellow]

So from this we can assume that the extra revenue, in pocket, is not a necessity and would be for a more comforts. They aren't losing by refusing the promotion or overtime.

That opens doors for others. More so on the overtime not taken though. Some one might actually get a job because of that so unemployment should drop.

If the work wants doing whoever and however it gets done the tax man wins, as does society.

And the same applies to early retirement. If the job still exists after the previous incumbent takes early retirement the tax take from the new man/woman continues as before.

 

[Dryce]

There are many other examples for the complex relation between tax policies and tax revenues. My impression is that the majority of tax policies tend to stem from a political perspective, and ignoring the science.

The mess that is NI and IR35 ....

 

[GeeJayW]

To clarify, I am not arguing for lower taxes from an ideological of from the social fairness points of view.

Instead, I am simply suggesting that we start by listening to economists and statistians with regard to how tax revenue collection can be optimised, and then run this though the political lense.

Tax revenue is obviously a complex issue, and it is not limited to the effect it has on workers' financial motivation and productivity.

As an example, increases in taxes and especially in VAT tend to result in a shrinking formal economy and an expanding black economy: sole traders not raising invoices, labourers working for cash-in-hand, etc.

There are many other examples for the complex relation between tax policies and tax revenues. My impression is that the majority of tax policies tend to stem from a political perspective, and ignoring the science.

I'm not accountant, but think that the current tax system is too complex. It encourages people on higher incomes to avoid paying where possible. If it were more cost effective to pay tax into a simplified system than it is to pay an accountant to navigate the complexities in order to avoid paying taxes, I think more taxes would be collected overall.

The old beer buying tax analogy always makes me smile...

The Tax System Explained - Using a Beer Analogy

www.moore.co.uk

 

[m80]

I'm not accountant, but think that the current tax system is too complex

Intentionally.
The more complex the less we people are aware as to how much we actually pay.

 

[st13phil]

The more complex the less we people are aware as to how much we actually pay.

The corollary to that argument is that if we knew what we paid we could make a better judgement about the value offered in return. The lack of transparency promotes arguments about the quantum of the sums paid rather than the value derived.

Another advantage of simplicity is that it makes "managing" the amount of tax paid much more difficult, and much less beneficial.

FWIW, I think one of the fundamental problems with the taxation system is that it's used not just as a means to raise revenues to pay for public services, but also as a mechanism to drive behaviours (mainly individual, but to an extent corporate too). That has the effect of massively confusing the purpose of taxation and increasing the view that it is largely unjust and unfair.

 

[m80]

The corollary to that argument is that if we knew what we paid we could make a better judgement about the value offered in return.

I think we're in agreement here,
We can't fathom it, they don't design it for us to, they don't want us to.

Such realisation of how the money is misspent would cause riots. The cost of those would mean increased taxation.

And there is a whole industry around taxation and improving the efficiency of the responsibilities of tax responsibilities.
While it can be seen that simplification and transparency is often more easily doable than creating something even they get confused about imagine the uproar if so many professional's were in less need.

And then there is the justice industry that more often has bugger all to do with justice.

 

[markjay]

The mess that is NI and IR35 ....

One of the issues with self-employment in general, is that people can (in some circumstances) pay less NI as well as avoid having making contribution into a Workplace Pension Scheme, so they have a 'better life' during their working career, but - if they do not plan ahead for retirement or for sickness and disability etc - they too-often end-up a burden on the State at some point, without having contributed into the system in the same way the other have.

A case-in-point was the Furlough scheme, which initially was aimed at PAYE employees only, and was unable to accommodate for the self-employed, and while this has been corrected to some extent further down the line, many of the self-employed were still not compensated to the same level that PAYE employees were.

 

[Bellow]

One of the issues with self-employment in general, is that people can (in some circumstances) pay less NI as well as avoid having making contribution into a Workplace Pension Scheme, so they have a 'better life' during their working career, but - if they do not plan ahead for retirement or for sickness and disability etc - they too-often end-up a burden on the State at some point, without having contributed into the system in the same way the other have.

But the self-employed create a job where there was none before. You could argue that if they hadn't they would have contributed more to the state as an employee but then another employee would be displaced by them. One more job created is another tax take opportunity even if it is at a lower rate.

 

[flowrider]

So was I being alarmist about increasing pension tax for traditional Conservative voters.

In the news today:

Treasury plans to cover the cost of Covid through a raid on pensions will end up "clobbering" traditional voters, Conservative MPs have warned.

One idea being examined is reducing the pensions lifetime allowance from a little above £1 million to £800,000 or £900,000, the Telegraph understands. Another would see individuals contributing to pensions getting the same rate of tax relief, while a third is new taxation on employer contributions.

The move has sparked fear among some Tories, not least those in southern seats already reeling from last week's loss of Chesham and Amersham.

One said: "The Prime Minister is a people pleaser - he wants to carry on spending in the Red Wall. If they can find a way that pushes the bill onto Tory heartlands they will do it - clobbering those who are making provision for retirement seems a good place to start."

Politics latest news: Pensions raid will 'clobber' Tory heartlands to fund Boris's spending spree

My understanding is that the average pension pot for a 55 year old is currently less that £70k so for the average man or women dropping the LTA won't matter.

 

[flowrider]

In my experience the guys that can earn overtime tend to work in manual jobs of some kind, I have a pal like this and he refuses to do any overtime at all because he will be taxed, he can work evenings and weekends for himself doing much the same stuff tax free.

Only tax free if he fails to declare it as income.

 

[Deleted member 65149]

… further down the line, many of the self-employed were still not compensated to the same level that PAYE employees were.

And as a result of the fixed structure of various grants, many of the self-employed were compensated to a greater level. My wife’s income for 2020-21 was boosted to a higher level than previous years - so her tax bill will be significantly higher, as in percentage not pounds. (No, she’s not complaining about the tax increase and so returning the grants!)

EDIT. I should add that the SEISS (furlough equivalent) that my wife received during the time she wasn’t allowed to work was helped by the fact that she always declared every penny she earned, including tips. She also received a grant from the council because she is registered for business rates for her work from home, something that most people don’t do. Honesty paid this year, even if it cost in previous years.

 

[markjay]

But the self-employed create a job where there was none before. You could argue that if they hadn't they would have contributed more to the state as an employee but then another employee would be displaced by them. One more job created is another tax take opportunity even if it is at a lower rate.

This is probably true for some people, however I was referring to PAYE employees who ask to become self-employed - contractors, in effect - in order to reduce their tax liability. We had at work a few people who requested this over the past few years.

 

[m80]

Having completed my self assessment for more years than I can remember I applied for the self employed covid grant.

I was expecting revenues to be hit harder than they were.

As I put in Land & Property pages I was rejected as not self employed.
It feels like I work at my only source of revenue, so from that it would seem I work got the Gov't.
And tbh with the onslaught of legislation and increasing responsibilities I can see that to be true.

It really is a cr*p job and I could do with a change in direction, but at my age that looks to be difficult. So I'll look forward to retiring on a v meagre pension that my employer has never contributed toward.

 

[m80]

This is probably true for some people, however I was referring to PAYE employees who ask to become self-employed - contractors, in effect - in order to reduce their tax liability. We had at work a few people who requested this over the past few years.

I thought HM Gov't had legislated to prevent or at least reduce that.
As I understand to be a contractor you need revenue from various clients.

 

[markjay]

I thought HM Gov't had legislated to prevent or at least reduce that.
As I understand to be a contractor you need revenue from various clients.

Correct. And yet we get people asking for this. As IT engineers, I suppose all they need do is have a few customers of their own that they can invoice for odd jobs here and there, alongside working for us full-time.

 

[190]

My understanding is that the average pension pot for a 55 year old is currently less that £70k so for the average man

If that is true then the average 55 year old is in for a sparse retirement as 70K buys a pension of only £3500 per year. The problem with averages is they include many people who didn't pay into a pension when they had the chance even when the employer would have paid in more if they had. Lots of others were not so short sighted. I paid in from being 18 years old for the next 48 year and was lucky to be in several excellent pension schemes with big employer contributions.

 

[Deleted member 159894]

Having completed my self assessment for more years than I can remember I applied for the self employed covid grant.

I was expecting revenues to be hit harder than they were.

As I put in Land & Property pages I was rejected as not self employed.
It feels like I work at my only source of revenue, so from that it would seem I work got the Gov't.
And tbh with the onslaught of legislation and increasing responsibilities I can see that to be true.

It really is a cr*p job and I could do with a change in direction, but at my age that looks to be difficult. So I'll look forward to retiring on a v meagre pension that my employer has never contributed toward.

As you are a landlord the expectation was that if your tenants failed to pay then you could obtain a payment holiday from the lender to compensate.

 

[Dryce]

But the self-employed create a job where there was none before. You could argue that if they hadn't they would have contributed more to the state as an employee but then another employee would be displaced by them. One more job created is another tax take opportunity even if it is at a lower rate.

I've been on various sides of this multi-faceted divide and I've observed it working in various ways.

It's a mess and too many people 'play' the system. NI and VAT are probably the two biggest influencers. And they mean that there's an artificial step between non-PAYE and non-VAT businesses and those that handle PAYE and need to account for VAT.

My view is that the NI system needs a big reform - and that as turnover based VAT schemes are now established for VAT accounting then these should be applied to smaller businesses.